How to Teach Yourself Patience as a New Investor

Happy Friday Distillers! Today’s post is on the all too important (and difficult) topic of teaching ourselves patience as a new investor! It is also a guest post from Casey who is a musician, investor, writer and small business owner. More on his bio below, but for now let’s get right to it!

How to Teach Yourself Patience as a New Investor

After you’ve put together and implemented a strategy for your own investments, there is one more skill left to learn: The ability to do nothing.

That’s a hard thing to do if you watch your investments fluctuate up and down with market conditions on a day-by-day basis. Even if you follow Matt’s two-step method for investing, it’s easy to get impatient (or even anxious) when your portfolio takes a brief dive during a Friday trading session.

Any investment strategy must include patience as a vital component, however. Below are three tips for learning how to practice that kind of patience as an investor.

Buying Right and Sitting Tight

Plenty of investors forget an important lesson: The easiest way to make money in the stock market is by holding stocks, not in buying or selling them. In other words, asset appreciation is your friend, but assets need time to appreciate.

Likewise, any investment you make requires due diligence. Although it’s tempting to go after a stock that people are excited about, you mustn’t be governed by emotions as you make financial decisions. You cannot get frustrated with your stocks or give in to the temptation to sell quickly.

After all, impatience is one of the major reasons unsuccessful investors trip themselves up — and one major reason smart investors gain an advantage. As Warren Buffett says, “The stock market is a device for transferring money from the impatient to the patient.”

There Will Always Be Opportunities

As cliche as, “there are plenty of fish in the sea,” sounds, it applies to investments. “Patient investing is similar to fishing,” Investopedia notes. “There are many fish in the lake and it isn’t necessary to catch every fish that swims by in order to be successful. In fact, it’s only necessary to catch those few that bite and fill up your net (or that meet your trading criteria).”

So, don’t worry about chasing every opportunity you see. There will be opportunities like those every day. Instead, focus on developing your own trading criteria, and don’t go after anything that fails to tick every one of your boxes.

And if you jump the gun on an opportunity? “Exit the trade and wait for it to develop based on your predefined rules and not on your emotions,” Investopedia says. “Take the costs associated with the trade as a lesson, learn from it and move on.”

Set Long-Term Goals

Cabot Wealth Network makes the argument that most investors are slowly becoming short-term oriented — i.e. impatient.

The better move, Cabot’s team argues, is to practice patience and focus on the long term. Looking at those farther-off horizons gives your seedling investments the chance to grow and mature into huge oaks. One way to do this is by setting your sights on more than what short-term gains can offer. Think about how you can grow your investments by 300%, 500% or 1000% over time.

“While the adage that, ‘you can’t get hurt taking a profit,’ has some truth to it, this can also lead to expensive mistakes,” writes George R. Evans, CFA at OppenheimerFunds.

“Let’s say you invest in a company and the price doubles in a year. You may feel pretty smart taking that profit and moving on. However, we’ve seen great companies simply correct a bit, or move sideways for a time and then proceed to double and then double again! The quick sale might ultimately cost you a lot of money.”

Patience is a valuable skill to cultivate as an investor. Always keep in mind that it takes most of us the better part of a lifetime to grow wealth. That may seem like a daunting proposition, but applying the above tips will make it much more possible.

-Casey

AUTHOR BIO
Casey Meehan is a musician, investor, writer and small business owner. His company, Epic Presence, is a content marketing firm based out of Chicago.

7 comments… add one
  • Diligent Dividend Feb 24, 2017, 7:22 am

    Awesome article with some great advice. I have definitely been guilty of a few of these things. Recently I have sold a few more stocks the. I would like to have but that’s mainly due to the fact that company’s havnt increased dividends over prior years or I wasn’t happy with the scandals I.E. WFC. I have only closed out two positions in one year though so that’s not really that bad.
    We can all take away some lessons from this advice and truly focus on that long term instead of the short term.

  • Wall Street Physician Feb 24, 2017, 7:30 am

    Nice guest post, Casey. This post reminds me of the Stanford marshmallow experiment, where children could choose between getting one marshmallow or two marshmallows later if they could just have willpower and wait. The kids who picked two marshmallows later were found to be more successful in life. Patience as a new investor will be handsomely rewarded later in the form of compound interest.

  • Ryan @ Just Another Dollar Feb 24, 2017, 8:15 am

    My first experience with the stock market came when I was19 and got my first full-time job. I opened an account in the fall of 2008. As most of you will remember, February 2009 was the lowest point in the Great Recession, and every stock was deeply discounted. I deposited a couple thousand dollars and made a couple buys, then checked them diligently, jumping in and out of positions and trying to time the market. At the end of the first year, my portfolio was up about 25%, but I had missed out on some major gains by not being patient. It was a good lesson to learn and something I carried forward into other aspects of life.

    Great post from Casey, thanks Matt for turning over the Mic! I’d be curious to hear your long-term outlook on the stock market with the baby boomer retirement pulling trillions out over the upcoming years and fewer people putting funds into the market to replace it. Can the overall market continue to grow? Thanks!

    Ryan

  • Mrs. Picky Pincher Feb 24, 2017, 11:07 am

    Excellent advice! Investing is all about long term goals and patience. I’ve heard too many stories about people panicking over short term events, losses, etc. and changing their allocations–they lost money big-time.

  • Save Splurge Deny Debt - Cameron Feb 24, 2017, 9:17 pm

    Good Post that a lot of people have trouble with, myself included!

    People want a get rich quick scheme and I think are becoming more impatient. Also with information at your fingers all the time you can check your portfolio every 15 minutes and drive yourself crazy!

    I always like to go to one my favorite Buffett quotes that is: “our favorite holding period is forever”

    As long as I am getting a fair price whether it is a 52 week low or high I want to purchase quality companies for a long time. Being young helps but the dividends that reinvest and a plan to invest to retire early will make it all worthwhile.

    Great post!
    -Cameron

  • Tim @ CTM Feb 28, 2017, 7:53 pm

    Well said. Last year, I must have lost ~$600 on Robinhood because I was extremely impatient. I’m taking a different approach this year. There’s an app for pretty much anything out there now. And with an android, it’s so easy to add widgets to your main screen. Makes it hard not to check your balances consistently.

  • John Mar 1, 2017, 9:26 pm

    Great article! When I first started investing, I read article after article on being patient… then I promptly panicked and sold about 5 different times before I finally got comfortable with the discipline required for long term investing. It’s definitely a vital trait for making money in the stock market.

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